SBI downgrade may affect India’s banking system: FicciBank stocks slump for 2nd day, dragging Sensex by 72 pts
New Delhi, October 5
Apex industry body FIICI on Wednesday expressed concern the rating downgrade of State Bank of India could have serious ramifications for the Indian banking system. "Moody's rating downgrade of financial strength of State Bank of India, the country's largest lender, had raised legitimate concerns on the outlook for the Indian banking sector", the chambers said in a statement.
FICCI said concerns over the financial health of India's largest bank had
already gained significant traction since its net profit plunged 99 per cent in
the last quarter of the previous fiscal due to higher provisioning for bad
loans.

Moody’s retains ‘C’ rating of ICICI Bank
New Delhi, October 5
A day after downgrading its rating of public sector lender SBI's financial strength, Moody's today re-affirmed its rating for ICICI Bank and said the private sector lender continues to maintain a robust franchise and a strong liquidity, capitalisation and earnings profile.
"Moody's believes that the probability of systemic support for ICICI is high, given its sizeable retail deposit franchise,” it said.
— PTI

Global shares dive to 15-month low on Greek fears
London, October 5
World stocks hit a fresh 15-month low on Tuesday and the dollar rose to a nine-month peak as fears over a major banking crisis in Europe mounted along with expectations Greece could soon default, accelerating a global economic slowdown.

An empty hall at the Athens international airport as Greek state workers went on a 24-hour strike to
protest against austerity, defying a plea by the government to rally behind its effort to fend off national bankruptcy. Airliners were grounded,
trains halted and tax offices in the city were shut. — Reuters

Europe crisis casts shadow over diamond units
Mumbai, October 5
Owners of diamond cutting and polishing factories in western India are bracing for an extended downturn as the economic crisis in Europe worsens. Units in
Mumbai, Gujarat and Rajasthan are planning to give extended Diwali vacations to their employees as there is a slow down in fresh orders for
2012.

Telecom sector may see spate of M&As
New Delhi, October 5
The reducing profit margins and increasing operational costs could soon lead to consolidation in the India's telecommunications sector with mergers and acquisitions being the name of the game.

New iPhone 4S draws muted response, Apple shares slide
Cupertino, Calif., October 5
Apple Inc's newest iPhone left Wall Street and fans wishing for more than a
souped-up version of last year's device, at a time when rival smartphone makers are nipping at its heels.
At his first major product launch since being crowned CEO, Tim Cook ceded the critical iPhone presentation to another executive, and failed to generate the same level of excitement and buzz that predecessor Steve Jobs was famous for.
The new iPhone 4S is identical in form to the previous model, disappointing fans who had hoped for a thinner, bigger-screened design. Apple's shares fell as much as 5 percent, before recovering with the broader market to close down 0.6 percent.

Apple CEO Tim Cook speaks in front of an image of an iPhone 4S at the Apple headquarters on Tuesday. — Reuters

Switzerland, India to share tax info from next fiscal
Vienna, October 5
India and Switzerland will start exchanging information on tax related matters from the next fiscal after the new tax information exchange treaty is ratified by the Swiss Parliament tomorrow, paving way for obtaining data on black money stashed there.

New Delhi, October 5
Apex industry body FIICI on Wednesday expressed concern the rating downgrade of State Bank of India could have serious ramifications for the Indian banking system. "Moody's rating downgrade of financial strength of State Bank of India, the country's largest lender, had raised legitimate concerns on the outlook for the Indian banking sector", the chambers said in a statement.

FICCI said concerns over the financial health of India's largest bank had already gained significant traction since its net profit plunged 99 per cent in the last quarter of the previous fiscal due to higher provisioning for bad loans. Mounting stress on State Bank of India's NPAs (nonperforming assets) gave reasons for some to call it a "stressed" bank

Given the situation of alarmingly rising NPA levels, uncertainty over ability to raise capital and infusion of capital by the government in the face of strained finances, the move could have far reaching implications for the banking sector as a whole, FICCI said.

Shares of SBI took a beating on the bourses for the second consecutive session today, losing more than 3.9 per cent after Moody's downgraded its rating. The stock fell despite assurances from SBI chairman Pratip Chaudhuri that the bank expects to receive a capital infusion of up to Rs 9,000 crore from the government this fiscal.

Other banking stocks including ICICI Bank, HDFC Bank also fell around 2 per cent each and the banking index took a beating. SBI and other banking stocks dragged the BSE Sensex down to a 20 month low of 15,792 points down 75 points.

Amid the fragile domestic macroeconomic scenario, loss of investor confidence in SBI's bonds, considered a proxy for the government in financial services, was tantamount to a huge systemic risk for the banking system, FICCI said.

For Indian banks the problem is not their high exposure to sovereign debt in the eurozone but home grown. Indian banks' bad debts are rising as India Inc has started feeling the pinch of high interest rates. The growth in nonperforming assets as a percentage of banks' loan portfolio is almost at a five-year high in the first quarter of this fiscal. The situation is likely to aggravate as banks may also have to restructure loans that borrowers are finding difficult to service because their businesses have been affected by a slowing economy.

The government has estimated a capital infusion of Rs 2 lakh crore into the state owned banks by 2020. Given the state of the government's finances, capital infusion by the exchequer will put pressure on the already strained fiscal balances whereas raising fresh capital from financial markets in a bearish scenario would entail its own cost for Indian banks.

London, October 5
World stocks hit a fresh 15-month low on Tuesday and the dollar rose to a nine-month peak as fears over a major banking crisis in Europe mounted along with expectations Greece could soon default, accelerating a global economic slowdown.

Stocks on Wall Street too tumbled, following drops in Asia and Europe, as fears over a major banking crisis
in. In morning trading, the Standard & Poor's 500-stock index was down 0.3% to 1,090.65 points, after dipping officially into bear market territory, defined as a 20% drop from the previous peak. The S&P 500, considered a broad measure of stock performance, last peaked in April.

Sovereign debt insurance costs for the region's economic powerhouse Germany hit a record high after euro zone finance ministers said they were reviewing the scale of private sector involvement in a second bailout package for Greece, a move that threatens to hasten a default.

At their meeting in Luxembourg , the ministers also agreed Greece could wait until mid-November for the next instalment from the existing aid programme, putting further pressure on Athens to get to grips with its debt problems.

While many in the market expect Greece to default at some point, the impact on banking sector was still not fully priced in. European banking shares fell 4.2%, with Dexia shedding as much as 37% on top of its 10% fall on Monday, as worries about the Franco-Belgian bank's heavy exposure to Greece grew.

"What you're now beginning to see is they (investors) are now picking out the banks. Dexia is the weakest," said Justin Urquhart Stewart, director at Seven Investment Management . "Politicians have to stand behind these banks --whether you call it state support , nationalisation, you have to keep the financial system working otherwise we will end up with another credit crisis."

Expectations the region's paymasters in Berlin will have to fork out increasing amounts of money to bail out weaker elements within the Eurozone sent the cost of insuring German debt against default to record highs, with the country's 5-year CDS rising to 121 bps. Debt insurance costs for Belgium and peripheral euro zone states also rose.

The MSCI world equity index fell 1.5%, hitting its lowest since July 2010. The index has fallen more than 18% since January and more than 24 % since hitting a three-year high in March. European stocks lost 2.6% while emerging stocks fell 2% to hit their lowest since September 2009.
— Agencies

Mumbai, October 5
Owners of diamond cutting and polishing factories in western India are bracing for an extended downturn as the economic crisis in Europe worsens. Units in Mumbai, Gujarat and Rajasthan are planning to give extended Diwali vacations to their employees as there is a slow down in fresh orders for
2012.

"Right now we're busy completing the orders for the Christmas and New Year season, but orders for subsequent months are drying up," said Ajay Mehta who owns diamond cutting and polishing units in Mumbai and Surat.

Owners of many diamond units have announced that they will begin their vacations from this weekend after the Dusshera puja at their premises. However they have not given a fixed date for their workers to return. In the past diamond units used to reopen three weeks after Diwali.

According to jewellers business is hurt by rising prices of gold and diamonds. "Demand for jewellery is sluggish this year as prices of gold and diamonds are high," said Hasit Dedhia, owner of a jewellery show room in south Mumbai. According to him, the fall in the rupee versus the dollar has caused prices to remain high in the domestic market while sentiment is poor in Europe and the United States.

Trade publications are reporting that diamond sales in the domestic market will see a de-growth this year as merchants reduce prices to offload inventories.

Many diamond merchants are afraid of a repeat of 2008 when the recession in the US resulted in large-scale cancellation of orders.

The buzz in the trade is that a number of merchants who went deep into debt are yet to resume business.

New Delhi, October 5
The reducing profit margins and increasing operational costs could soon lead to consolidation in the India's telecommunications sector with mergers and acquisitions being the name of the game.

As the new telecom operators seek to recover investment costs and face an uncertain future in the wake of the department of telecom (DoT) seeking to cancel a large number of licences issued in 2008 on first-come-first-serve basis by then telecom minister A. Raja, analysts say the mergers and acquisitions could take place much earlier than expected.

Experts point out that the newcomers are still struggling to find a foothold in the already overcrowded space and as such are unable to eke out a living, let alone recover investments.

Despite being the world's second-largest telecom market with over 850 million users, domestic operators are reeling under tremendous pressure due to stiff competition, which has kept tariffs at rock-bottom levels.

The competition intensified in 2008, when seven new operators were given licence. Intense competition and tariff war have hard hit the margins and profits of operators.

According to market analysts some of the new players are waiting eagerly for the government to come out with M&A norms for the sector.

Telecom sector regulator Telecom Regulatory Authority of India (TRAI) has been hinting at some amendments to the M&A norms, but is still to come out with them. Once that happens it would pave the way for faster buyouts. New M&A norms are expected to be unveiled as a part of the new telecom policy (NTP) of 2011.

While some of the new operators have been optimistic about their growth prospects, some others have gone on record saying that that various permutations are possible.

Bharti Enterprises chairman Sunil Bharti Mittal has gone on record saying that the Indian telecom sector will see consolidation with the increase in the number of operators and the consequent erosion in profitability of the players. While stressing for the need for a comprehensive merger and acquisition policy, he had said, "Consolidation is a natural phenomenon...Bloodbath have started to happen. There is enough of it now... Market caps have come to a half. Companies are making losses after so long. There will be only few players six, seven but certainly not twelve. It is inevitable".

Telecom Minister Kapil Sibal has also stressed on the need to consolidate the telecom industry. "The industry cannot afford to have 12-13 operators in a circle. Spectrum can be shared and there is no need for over-regulation", he said.

Cupertino, Calif., October 5
Apple Inc's newest iPhone left Wall Street and fans wishing for more than a souped-up version of last year's device, at a time when rival smartphone makers are nipping at its heels.

At his first major product launch since being crowned CEO, Tim Cook ceded the critical iPhone presentation to another executive, and failed to generate the same level of excitement and buzz that predecessor Steve Jobs was famous for.

The new iPhone 4S is identical in form to the previous model, disappointing fans who had hoped for a thinner, bigger-screened design. Apple's shares fell as much as 5 percent, before recovering with the broader market to close down 0.6 percent.

But analysts say the new device sported some new features, such as voice commands, to draw in consumers and is still going to be a big draw this holiday season, particularly as the phone is now available on Sprint's network in addition to AT&T and Verizon Wireless.

It remains to be seen whether the iPhone 4S can stem market share gains by phones running Google Inc's Android software. Samsung Electronics, notably, is growing global shipments several times faster than Apple and is now estimated at within a hair's breadth of catching up in worldwide market share.

"It's been 16 months and all you've got is an A5 processor in the existing iPhone 4," BGC Partners' analyst Colin Gillis said of the new Apple phone. "It's a mild disappointment, but they're still going to be selling millions of units."

The iPhone 4S's voice commands - for sending messages, searching for stock prices and other applications -- caught the attention of several analysts who argued it could profoundly change the user experience. — Reuters

New Delhi, October 5
Silver coins suffered the biggest single day plunge of Rs 7,000 to Rs 58,000 per 100 pieces here on Wednesday on fresh arrivals for the festival season in tandem with a steep fall in the industrial
metal's prices.

Gold prices also dropped by Rs 835 to Rs 26,440 per 10 grams, while silver shed Rs 2,500 to Rs 50,800 per kg on subdued demand.

Market analysts said the steep dip in silver coins is surprising as their demand normally picks up at this time of the year, as they
are used as gifts as well as pooja ceremonies during Dhanteras and Diwali festivals.

Stockists and retailers would have to shell-out Rs 57,000 for 100 pieces of silver coins.
— PTI

Vienna, October 5
India and Switzerland will start exchanging information on tax related matters from the next fiscal after the new tax information exchange treaty is ratified by the Swiss Parliament tomorrow, paving way for obtaining data on black money stashed there.

"It (information sharing) will take place from the first day of the next financial year, January 1, 2012 for Switzerland and April 1, 2012 for India," M Ganapathi, Secretary (West), Ministry of External Affairs, said here while briefing reporters on President Pratibha Patil's just concluded state visit to Switzerland. The move comes at a time when the issue of black money stashed in Swiss banks has become a major concern back home with political parties and civil society taking up the matter.
— PTI